2. Using Pensions to Reduce Income Tax

Question 1

What is Adjusted Net Income (ANI)?

Answer 1

Grossed up income from all sources - salary, dividends, interest, etc. LESS charity contributions, gross value of PERSONALLY MADE pension contributions

Question 2

What does ANI affect

Answer 2

Child Benefit Allowance (lose 1% for every £100 of ANI above £50k)
Personal Allowance (lose £1 of allowance for every £2 of ANI over £100k)

Question 3

What are the 6 rules that must ALL apply to affect recycling of Pension Commencement Lump Sum (PCLS)

Answer 3

PCLS (plus any other PCLS in previous 12 months) must be > £7,500
PCLS means that the pension contribution is significantly > than otherwise
‘Significantly >’ means >30% of the expected
Cumulative sum of extra contribs > 30% of PCLS
The additional contributions can be by anybody
The recycling was pre-planned

Question 4

Estate Planning

Answer 4

If have significant amount sitting in bank and have relevant UK earnings, making use of unused annual allowances